New Gold Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 26, 2023

There are 7 speakers on the call.

Operator

Good morning. My name is Jenny, and I will be your conference operator today. Welcome to the New Gold's Third Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Easy advice that today's conference call and webcast is being recorded.

Operator

After the speakers' remarks, there will be a question and answer session. I would now like to turn the conference over to Ankit Shaw, Executive Vice President of Strategy and Business Development. Thank you.

Speaker 1

Thank you, Jenny, and good morning, everyone. We appreciate you joining us Q3 2023 Earnings Conference Call and Webcast. On the line today, we have Patrick Oden, President and CEO Yohann Bouchard, COO and Keith Murphy, our VP of Finance. Should you wish to follow along with the webcast, please sign in from our homepage at newgold.com. Before the team begins the presentation, I'd like to direct your attention to our cautionary language related to forward looking statements found on Slides 23 of the presentation.

Speaker 1

Today's commentary includes forward looking statements relating to New Gold. In this respect, we refer you to our detailed cautionary note regarding forward looking statements in the presentation. You're cautioned that actual results and future events could differ from those expressed or implied in forward looking statements. Slides 23 provide additional information and should be reviewed. We also refer you to the section entitled Risk Factors in New Gold's latest AIF, MD and A and other filings on SEDAR, which Gold's Q1 results.

Speaker 1

In addition, at the conclusion of the presentation, There are a number of endnotes that provide important information and should be reviewed in conjunction with the material presented. I will now turn the call over to Pat for some opening remarks.

Speaker 2

Thanks, Ankit, and good morning, everyone. I want to welcome Yohann Bouchard, Executive Vice President and Chief Operating Officer to the call. Yohann will cover the operational portion of these calls going forward. Yohann joined the company 6 months ago with Luke Buchanan, VP, Technical Services. Both have a strong proven operational background, which is strengthening our management team.

Speaker 2

Before turning the call Over to Pete and Johan to discuss the quarter. I want to give a few brief remarks. We had another 7th quarter here at New Gold. Our efforts this year are paying off and due to the strong operational performance over the 1st 9 months of the year, production is tracking to the top end of guidance and our all in sustaining costs are tracking to the low end of the guidance range. These strong results on New Gold generated $22,000,000 of positive free cash flow.

Speaker 2

This is the first time we have generated positive free cash flow as a company since Q4 2021. We did this despite continuing to invest in our growth projects and securing future production. I expect this positive free cash flow trend to continue and increase in the coming years as we complete our growth projects. Our Health and Safety performance continued to meet expectations with a year to date of 1.011 through the 1st 9 months of the year. In fact, earlier this month, Rainy River celebrate a significant milestone of 1 year without the lost time injury.

Speaker 2

I am particularly pleased with our ability to meet our objective without compromising safety, which is a testament to our courage to care culture. The strong operating results at Twin Rivers over the last 4 quarters speaks strongly to this. Looking to our future, we continue to make progress advancing our growth in Cieloaks. We continue to advance on the ground development at Trinity River. The ramp access to main zone Made good progress with 1st ore scheduled for Q4 2024.

Speaker 2

And as highlighted in our recent press release, You have accomplished some significant milestones. I want to reprise us the completion of the first dropout at C zone And the final commissioning of all 29 dewatering wells at the New Aventon storage facility. It is our key for seasonal production, and we are well on our way to reaching commercial production in the second half of next year. We also provide an update on promising opportunities to extend the mine life at New Afton beyond 2,030, Which I'm very excited about. This is a pivotal moment for the new Afton mine with production growth and declining costs expected in the near term and all major capital expenditures for tailings stabilizations completed.

Speaker 2

At both operations, we will continue to deliver on expectation with a strong focus on cost control and operation discipline.

Speaker 3

With that, I will turn the call over to Keith. Keith? Thank you, Pat. I'm on Slide 7, which has our operating highlights. The increase over the prior year quarter is primarily due to higher gold grades and higher throughput.

Speaker 3

New Afton produced approximately 18,000 gold ounces and over £13,000,000 of copper, with the increase over the prior year quarter due to higher grades and increased recovery. Gold production at New Afton also includes 761 ounces from the ore purchase agreements. Operating expenses per gold equivalent ounce decreased over the prior year periods, primarily due to higher production and sales. Consolidated all in sustaining costs for the quarter were $14.77 per equivalent ounce. The decrease compared to the prior year quarter is due to the lower operating costs, lower sustaining capital spend and higher sales volume at both sites.

Speaker 3

Turning to our financial results on Slide 8. 3rd quarter revenue was $201,000,000 driven by sales of approximately 107,500 gold ounces at an average realized gold price of $19.24 per ounce and sales of £13,000,000 of copper at $3.78 per pound. Q3 revenue was higher than the prior year quarter, primarily due to higher metal prices and sales volumes. Cash generated from operations before working capital adjustments was $88,000,000 or $0.13 per share for the quarter. Rainy River continued to deliver free cash flow and has generated $85,000,000 in free cash flow over the last 2 years.

Speaker 3

New Afton had its first positive free cash flow quarter in almost 2 years despite the ongoing investment in C zone. This is a testament to the strong operating performance in the quarter. The company recorded a net loss of approximately $3,000,000 or $0.00 per share during Q3. This is an improvement compared to the prior year quarter, on the revaluation of the Rainy River Goldstream obligation and the New Aspen free cash flow interest obligation. After adjusting for certain other charges, net earnings were $23,000,000 or $0.03 per share in Q3, was primarily due to higher revenues and lower finance costs, partially offset by higher operating expenses and depreciation and depletion Q2 of the higher production.

Speaker 3

Our Q3 adjusted earnings include adjustments related to other gains and losses. Our total capital expenditure for the quarter was $70,000,000 with $36,000,000 spent on sustaining capital and $35,000,000 on growth capital. At Rainy River, sustaining capital spend was primarily related to the tailings down raise, capitalized waste and capital maintenance. Growth capital related to the development of the Intrepid underground and underground main zones. Capital primarily related to C zone development.

Speaker 3

Slide 9 provides details of our capital structure. We had cash on hand at the end of Q3 of $179,000,000 an increase of $5,000,000 from the previous quarter, driven by free cash flow generated at both Rainy River and New Afton. At the end of Q3, the company's liquidity position was $553,000,000 We continue to execute short term hedges on cat and fuel and are hedged at around of 75% on hold for the 4th quarter. We will continue to evaluate short term hedge options on cadm fuel and utilize it as we see fit. To sum up, we remain in a healthy financial position with an increased cash balance following another excellent quarter, call, all while continuing to invest in

Speaker 1

our growth projects. Now I'll turn the

Speaker 3

call over to Johan to walk through our operating highlights.

Speaker 4

Very good. Thank you, Keith. So commencing by Rainy River, the operation continued to perform well, achieving another quarter in line with plan and delivering 10 gold standard. Through operational discipline, the operation is delivering on expectations and achieving a stable and reliable production quarter over quarter. The operation is well positioned to continue this trend into 2024.

Speaker 4

Agree ore is planned from the lower benches of Phase 3 and be interpreted under our mine and the processing plant is running well, achieving a throughput of more than 28,000 tonne per day in September. The operation is on track, which is the top end of the production guidance The open pit costs are expected to reduce significantly after 2024 with the completion of the waste stripping, With more stable quarterly results, we're now looking forward to the next 3 years in which we see a growing production profile with declining costs driving increasing cash flows. Now on Slide 12. So the underground production is planned to increase from the second half of twenty twenty four with expansion into the underground main zone. The connection run from Intrepid to underground main is advancing well, And we expect to be in a position to start raise borrowing the fresh air raise in Q1 next year.

Speaker 4

In parallel, the interpreted zone continue to produce between 800 to 1000 tonne per day with grade reconciling positively with 7th quarter achieving the highest quarterly production since 2021, mostly as a result of B3K continuing to exceed planned extraction rates. The exceptional performance over the 1st 9 months Put Neuascen in an excellent position to achieve the top end of the 2023 production guidance and the bottom end of the cost guidance. We expect the increasing production profile to continue over the coming years as C zone ramp up production. We made excellent progress this quarter achieving 2 significant milestones. First, we complete the 1st raw bell at C zone on time.

Speaker 4

This is significant because it marks the start of the season production ramp up period, putting the project on track for commercial production in the second half of the year. The 2nd major milestone in Q3 was commissioning of the final dewatering well at the New Aston tailings storage facility. As such, most of the activities and costs related to the tailings segmentation project are now completed. Wrapping up on Slide 15. This figure highlights a strong outlook at New Afton, And there's 4 key points that I would like to talk about here.

Speaker 4

The first, as season ramp up, GOL goals for the midpoint of 2023 guidance. Secondly, considering the fixed cost components of 50% with Mining, 75% with processing and 90% with G and A. The unit cost per ton basis is expected to decrease with the return of higher throughput rates. 3rd, almost all CapEx is upfront for the Block Cave For Block Cave mine and as such, there is a minimal capital expenditure after completion of the C zone project in 2025. And finally, beyond 2,030, there is significant upside that could extend life of mine for many more years, which is Q1 results.

Speaker 4

With that, I will turn the call back to Pat. Patrick?

Speaker 2

Thank you. So turning to our 2023 guidance. Following the strong results year to date, Renewables tracking toward the top end of the gold equivalent production range and all in sustaining costs are tracking to the midpoint of the guidance range. At New Afton, I am pleased to say that copper, gold and gold equivalent are all tracking toward the top end of the respective production guidance ranges with all in sustaining costs tracking toward the low end of the respective costs guiding range. It's been almost 1 year since I took the role as CEO at New Gold.

Speaker 2

I want to say how proud I am of our teams. We have strengthened both our corporate and site management teams throughout the year, And we all share the same vision of 1 team, fully integrated and pursuing the same objectives of delivering on expectations safely. We have come a long way and this is a driving force behind our strategy. Before concluding the presentation, I want to share a few reflections and reiterate what I have been seeing throughout the year this year and what I view to be the key priorities for the company. Our first priority was to continue to stabilize our operations.

Speaker 2

At Rainy River, the open pit challenges are behind us and the underground production at Interpreter has performed well We have positive reconciliation. The connection ramp to the main zone commenced in June and continues to make excellent progress. At New Afton, the B3 ramp up is complete and is exceeding plant extraction rate targets. Our second priority was to continue to advance our organic growth opportunities. At Rainy River, We are on track to deliver 1st ore from the main zone in Q4 2024 and production at Entrepid will continue below level 300, which will increase our pre contribution from underground.

Speaker 2

New Athens is on track and has achieved several milestones over the last 12 months, including completing the ticket tailings plant, Receipt of all C zone permits, completing the 2019 dewatering wells at the New Afton tailings storage facility and completion of the 1st season dropout. These zones remain on track for commercial production And we will look to follow-up on these early successes with future exploration programs. And 3rd, deliver on our guidance set out earlier in the year. We have performed well through 2023 with a continued focus on operational discipline and safety. I am pleased that we are tracking to the top end of our production guidance and the low end of our all in sustaining cost guidance.

Speaker 2

With 4 strong and consistent operating quarters behind us, It should be clear that we now have in place the right people to get the job done. The company is well positioned for significant free cash flow generation in the coming years, and I look forward to updating everyone in the coming quarters. This completes our presentation. So I will now turn it back to the operator for the Q and A portion of the call. Operator?

Operator

Call. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question is from Eric Greenmill from Scotiabank. Please ask your question.

Speaker 5

Hi, good morning, Patrick, Johan and team. Thanks for taking my question. I just want to drill down on Rainey for a moment, if I could, please. You made the decision to come into the underground main zone from Intrepid. Just wondering how we should look at the ramp up here towards the second half of twenty twenty four, in terms of working phases, kind of tons per day, and whether you still plan to put in the second decline From the end pit.

Speaker 5

Any comments would be helpful. Thanks. Guys,

Speaker 4

thanks for the question. I'm going to take that one. So I guess I want to say that the range is advancing really well. I mean, we're really pleased with that and ground control is excellent. And we're going to we're pretty much production profile.

Speaker 4

We're looking at being in ore sometime in Q4 next year. And we're going to see, I would say, an increasing profile in 2025, but it's looking very good. I just want to add, I mean, that we're also looking at mining below the 300 level that I've anticipated. That's going to So I have other grades to the processing plan. We're still working on a budget on that.

Speaker 4

But so far, I mean, we're really pleased with what we see And we're then saying very well about the second portal. With a side, I mean to do that from Interfer Pit just to not interfere with the open pit activities. And that second access at the bottom of the pit is not required on the short term because we're going to have a ventilation loop and a second mean of egress, But really came to have that portal and start construction maybe in 2025 in order to gold. Hopefully, did that answer your question?

Speaker 5

Yes, super helpful. Thanks so much. Just one more for me, if you don't mind. I saw some news here about Talisker, I guess doing an ore purchase deal for New Afton to process feed there. Any further comments on that?

Speaker 1

No, I mean, Eric, we have an investment in And similar to your purchase agreement that we have in place in New Afton, we're always looking for compelling opportunities that generate free cash flow given the feed capacity we have at New Afton. And so they've been a great partner to us and we always look for free cash flowing ore that can come to our mill.

Speaker 2

It's a win win deal for Telesco as it is for New Gold.

Speaker 5

Okay, great. Thanks. Yes, I appreciate taking my questions.

Speaker 2

Thank you.

Speaker 6

Just a couple of quick questions. Firstly, In terms of the CapEx spend, I think you alluded to it that the capital will decline significantly in 2025. But What should we expect in terms of capital from the New Afton mine in 2024? I'm just trying to Just trying to look at my technical report quickly and wondering if that's still in line with what the tech report had or whether or not there are significant changes outside of any

Speaker 3

Thanks Anita. No, we're still in line. We spent about $360,000,000 so far on the C zone project. So we're still in line with What we had in the tech report and are looking forward to completing that in the second half of twenty twenty four.

Speaker 6

Okay. And then similarly, question for Rainy River, is that still I mean that one, that tech report is far more up to date, but is that still valid?

Speaker 3

Yes, still in line. I mean, you've probably seen on the ratio, we continue to work through optimizing our mining sequence in 2023. So we'll continue that and look ahead to 2024 and then we'll Give guidance in 2024.

Speaker 6

Okay. And then just a question with regards to the Ontario Teachers pension plan buyback. Could you remind me when that comes due and what your plans are when it comes to that option being available? I'm not quite sure. I think it's due fairly soon.

Speaker 6

And what would be the purchase price for you to buy it back if that would be the case?

Speaker 1

Hey, Anita. Thank you. Yes, so the 4 year anniversary on the transaction is March 31st and then we have a 60 day window. So this is a Q2 2024 event. In terms of evaluation Together between us and teachers, we'd hire an independent evaluator based on our updated budget plan.

Speaker 1

So that's Currently in

Speaker 3

the works as we work through our budget.

Speaker 1

So this is more of a Q2 next year exercise. I mean, right now, we're focused on our operations just generating cash flow and we'll evaluate this more in the first half of next year.

Operator

Call. Thank you. There are no further questions at this time. Please proceed.

Speaker 1

Thank you, Jenny, and thank you everybody again for joining us today. As always, if you have any additional questions, please feel free to reach out to us by phone or e mail. Have a great day. Thanks.

Operator

Call. Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.

Remove Ads
Powered by Quartr
Earnings Conference Call
New Gold Q3 2023
00:00 / 00:00
Remove Ads